The MTA is sick to debt according to an alarming new report by the state's top financial watchdog, and the way out from under the mountain of owed money could be through riders' wallets.
The agency's debt burden could grow to alarming new heights because the MTA is counting on a rosy economic model, a scheduled 4-percent fare hike in 2021 and its job-cutting transformation plan (which has already pushed out one high-paid executive) just to survive long enough to deal with a $130-million deficit by 2023, according to state Comptroller Thomas DiNapoli.
Even if the economy stays swell and the transformation plan goes off without a hitch, the state will need $4.2 billion per year by 2023 just to service the debt — an amount that would eat 22.5 percent of the agency's operating budget.
Debt service has averaged 16.1 percent of the operating budget over the past 10 years.
"[T]he MTA could be left with both a heavy debt burden and the need for unplanned fare and toll hikes," DiNapoli concluded in a bummer of a four-page report, with the equally depressing title, "The Metropolitan Transportation Authority’s Rising Debt Burden."
That's not all: if the economy takes a deeper nosedive, if ridership drops or if Anthony "Hatchet Man" McCord can't cut down to the bone, the transit agency's economic outlook could get even worse, DiNapoli's report warns.
As it happens, subway ridership is dropping as MTA management suggests commuters who can skip mass transit do so to avoid getting sick, McCord's transformation plan rests on hiring a series of pricey executives and consultants and the stock market suggests that the financial world is reacting to the coronavirus pandemic with a hefty dose of "not stonks."
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Rider advocates said that in the face of the potential collapse of civilization, Gov. Cuomo must not also let the MTA itself collapse.
"The problem here is if the MTA raises the fare too high, it turns off ridership, which just makes ridership numbers plummet again," said Riders Alliance spokesman Danny Pearlstein. "The MTA can't sustain another major fare hike, so riders need the governor to find the money to make the MTA sustainable through sources other than on riders' backs."
In addition to ideas for operating revenue that have been floated before — like Assembly Member Robert Carroll's proposed internet package tax, a tweak to the way the state levies its gas tax or a small raise to the sales tax in MTA-served counties — Pearlstein said that the state's federal representatives have to get the MTA a piece of any potential federal bailout or stimulus.
"If there's a federal bailout for businesses, it should also consider the MTA, because the bus and subway are essential to all of the businesses in New York and they underlie all of their successes," Pearlstein said.
The MTA's debt problem stems from the agency's 2015-19 capital plan and, as such, also threatens the next 2020-24 one. DiNapoli writes that as the agency issues bonds to raise New York State's $7.3-billion share of the 2015-19 plan, the state government is promising to pay the interest on those bonds. But while the payments on those bonds will cost the state $29 million in 2020, DiNapoli writes that by 2028, the interest payments will balloon to $470 million, a year that could see someone other than Andrew Cuomo running the state (as inconceivable as that idea is right now).
That debt is slated to last until the 2050s, which means future governors could decide that they don't want to be responsible for MTA debt they never asked for, according to good government advocates.
"The MTA is putting this capital spending on its credit cards, but the state is paying the bill," said Reinvent Albany Senior Analyst Rachael Fauss. "The risk is when you have another governor 20 years from now, will he or she feel the need or responsibility to pay down the MTA debt?"
Fauss said that the rising debt levels show that as the agency begins its ambitious and historic $51-billion capital plan, Cuomo has to make sure that congestion pricing makes it through the federal approval process because the only debt the MTA can currently afford is a stable revenue-based fund like the kind of bonds backed by congestion tolls. Borrowing more and more money without firm financial backing could mean one day bond traders will downgrade MTA debt, making it more expensive to borrow money.
The MTA, for its part, was equanimous in the face of the comptroller's report, citing good marks from credit rating agencies (which have nonetheless sounded debt alarms similar to the one that DiNapoli's report did).
"The volume of debt outstanding continues to be manageable, as ratings agencies have continued to reaffirm when appraising our debt portfolio," said MTA spokesperson Aaron Donovan. "Projected annual debt service payments have declined in recent years thanks to careful management of our debt portfolio."
